Carrybacks and carryforwards

More About Carrybacks and carryforwards

Tax Analysts provides news, analysis, and commentary on the treatment of business losses,
including net operating loss carryback and carryforwards (or carryovers). The use of a year's tax loss in another year is generally referred to as a net operating loss ("NOL"). Section 172 provides for net operating loss deductions in tax years other than the year in which the loss occurred. Generally, an NOL can be carried back up to two tax years and carried forward up to twenty tax years.

The exclusions from the net operating loss deduction include a previous NOL and an individual's capital losses in excess of capital gains on capital assets.

The carryback of an NOL to a prior tax year is accomplished using either Schedule A of Form 1045, "Application for Tentative Refund" or Form 1139, "Corporation Application for Tentative Refund." These forms are also used to waive carryback and opt for only carryforward of NOLs.

Also, certain business credits can be carried forward or carried back under section 196. This is accomplished using Form 3800, "General Business Credit." The unused credit carryback is limited to one year, but the carryforward is still 20 years.

Section 382 limits the use of NOL carryforwards following business reorganization. If there is a change of ownership, only a portion of the loss carryforward may be used immediately following the transaction.

Guidance on net operating losses, carryforwards, and carrybacks may be found in the documents, news stories, and commentary articles published by Tax Analysts.